January 7, 2013
The Center Store Makes a Comeback
While grocers in recent years have been focusing on perimeter departments (meat, produce, and fresh bakery) as the source for differentiation, the center store has returned to become the "heartbeat" of the store, according to a new study from SymphonyIRI Group.
"Consumers are turning to home-based eating and self-reliant health and beauty care to save money, and the center store has benefitted greatly from these consumer rituals," said Susan Viamari, editor of Times & Trends, SymphonyIRI, in a statement. "It’s no surprise that competition is heating up, so differentiation will be the key to ongoing success. This is difficult in the center store, but it’s not impossible."
Center store, which captures about two-thirds of CPG dollar sales and 70 percent of unit sales, has out-performed industry average during the past two years.
On the downside, the report found that only three of the largest center store categories — coffee, energy drinks and bottled water — showed unit sales gains during the past year. The declines for the remaining categories showed that consumers are "still entrenched in a conservative mode" despite some improvement in the economy, according to SymphonyIRI. Still, nearly one-half of the 50 largest center store categories posted above-average unit sales growth during the past year.
Other findings from the study:
- Eight of the 10 fastest growing categories benefitted from new brand launches which "addressed consumers’ needs for exciting food and beverage solutions, sensory stimulation, health and wellness, and convenience;"
- Energy drinks, coffee and bottled water are among the largest sales-generating CPG products across the multi-outlet geography;
- Merchandising support increased across 42 percent of center store categories during the past year, with sizable increases posted across a variety of center store categories;
- Grocers hold 54 percent of general food sales, but share declined sharply during the past year with gains from c-stores, mass merchandisers and warehouse clubs;
- Grocers hold 38 percent share of beverage sales but c-store’s share has grown to 31 percent.
"In the end, the winners in the battle for share of spending and loyalty in the center store will be those that provide superior products and a better, more relevant selection in the center store," added Ms. Viamari. "This means products that are tightly targeted against the needs of a retailer’s shopper base. This will not only prevent customers from defecting to another retail banner, but it will also lure them into the center store and encourage them to buy products there versus competing perimeter department solutions."
BrainTrust
Recent Discussions
Discussion Questions
How can grocers differentiate via the center store? Are there particular center store categories you see becoming more important as differentiators for grocers?
Poll
The center area of the grocery store is where the competition from drug stores, mass merchants and warehouse clubs most impacts sales. Many grocers now realize this and are competing with better variety, better size choices and private label product.
Many supermarkets do need better signage to help shoppers know what is in the center aisles and therefore help sales increase. The supermarket is still the best way to do one stop shopping and as gas prices go up, I think they have a better chance to increase sales.
Bill Bishop’s SuperStudies have long argued that the center store is also the heart of grocer profitability—largely due to misleadingly high margins in perishables and a lack of understanding of fully loaded costs. So a return to emphasis on the center store can be a double win for grocers.
Short of a dedicated themed selection ala Whole Foods or Trader Joe’s, differentiating center store is indeed a tall task. Selection and price/value (not necessarily “lowest price”) can certainly be part of that.
But the greater opportunity for differentiation lies in the shopping experience itself. Not every grocer can be Stew Leonard’s—nor should they try. But is your center store a) functional (as compared to a confusing rat’s maze); b) inviting (there’s more than one reason we call all that pretty stuff around the outside “the perimeter”) and c) quick to shop?
Back in fraternity days, we gave an award each semester to the “least worst pledge.” Maybe just being “the least worst place to shop” wouldn’t be bad either.
Differentiation comes from differentiation. To make the center store a magnet for customers it must evolve into something desirably different.
Categories per se may or may not not be compelling enough to draw customers away from “differentiated” retailers such as Trader Joe’s, Jungle Jim’s, Starbucks, Whole Foods, Wegmans or Costco.
Some day I suspect an enterprising grocer will put ladies make-up clinics, or sports videos for men, or a local historic and nostalgic area in center store. These ideas, of course, may not be the best suggestions for today’s evolving consumers but they do illustrate the heart of differentiation.
The heart of the store is an ideal location to develop the source for local goods and services along with ethnic food selections. Developing support for local items is a great way to leverage community. Why not use center store and develop a ‘farmer’s market’ aisle and bring the ‘shop in shop’ concept to the grocery store? This would provide yet another vehicle to further develop the local grocery store as a community destination.
The center store will never eclipse perimeter departments in terms of sensory enjoyment, abundance and the subliminal message of freshness.
But center store does send important messages to shoppers when it offers the right targeted assortment and sustains high service levels.
These are not new values. The methods for achieving them have evolved, however.
Targeted store-level assortments result when retailers apply data-driven shopper analytics to the planning process and adopt techniques that enable In-Store Implementation. Key among those ISI processes is Computer Generated Ordering (CAO) – for both warehouse-delivered and DSD products—that ensures product availability without drowning the enterprise in excess inventory investment.
Targeted assortment and service levels are tightly coupled aspects of center store performance that I believe can spell the difference for the grocery retailer.
I agree with the comments of Frank/Ben/Gene—and in a certain way, have a slightly different point of view than the one suggested by Susan Viamari. Differentiating, changing the shopping experience, providing service, and doing things that are not exclusively product-based (assortment, pricing, superior products). While that cannot be ignored, it is not sufficient to create growth.
Offering something that is unique (and in center-store, that is rarely solely product-based) and not focused on the traditional “needs”—but on future “jobs” to be done is an area that more progressive clients of mine have been pursuing.
Making the center store appealing and differentiating it have been perennial issues for grocers. It may not seem very glamorous, but I believe that cneter store aisles and shelves don’t showcase the merchandise in the best way. Look at apparel retailers who know a lot about sightlines and displays—perhaps there are lessons there on re-inventing the center store experience.
In my area it is all about price, price, and price for the top sellers. If you do not compete in those areas, than trim the excess, and get aggressive where you can to compete. Gluten free, club packs, diabetic, and ethnic foods will do well, if the selection is good, along with “fair prices”.
Anyone can sell a cheap can of beans, but it takes a smart retailer to move the higher-end stuff, so take a balanced approach to move the top sellers, and present the unique foods to your particular market in a way that stimulates extra sales.
Integrate more fresh items into the center store to get more life into that area. Break up long aisles and group by meals.
Grocers can compete with more relevant assortments for local shoppers—specialized categories, in store signage to help find products, and more. The convenience meals for away from home eating, “better for you” assortments that make sense for every day shoppers—categories that smaller stores can’t execute as well.
In order to differentiate, one has to really be different or at the very least, portray themselves in a different way. The problem is that too many stores simply are “repackaged” versions of each other and don’t truly offer any unique or compelling differences. Things like local items, gluten-free, and other specialty items need to be presented and marketed effectively. Further, value has to exist on key items in order to drive sales as shoppers do compare these items to mass and other retailers.
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The center area of the grocery store is where the competition from drug stores, mass merchants and warehouse clubs most impacts sales. Many grocers now realize this and are competing with better variety, better size choices and private label product.
Many supermarkets do need better signage to help shoppers know what is in the center aisles and therefore help sales increase. The supermarket is still the best way to do one stop shopping and as gas prices go up, I think they have a better chance to increase sales.
Bill Bishop’s SuperStudies have long argued that the center store is also the heart of grocer profitability—largely due to misleadingly high margins in perishables and a lack of understanding of fully loaded costs. So a return to emphasis on the center store can be a double win for grocers.
Short of a dedicated themed selection ala Whole Foods or Trader Joe’s, differentiating center store is indeed a tall task. Selection and price/value (not necessarily “lowest price”) can certainly be part of that.
But the greater opportunity for differentiation lies in the shopping experience itself. Not every grocer can be Stew Leonard’s—nor should they try. But is your center store a) functional (as compared to a confusing rat’s maze); b) inviting (there’s more than one reason we call all that pretty stuff around the outside “the perimeter”) and c) quick to shop?
Back in fraternity days, we gave an award each semester to the “least worst pledge.” Maybe just being “the least worst place to shop” wouldn’t be bad either.
Differentiation comes from differentiation. To make the center store a magnet for customers it must evolve into something desirably different.
Categories per se may or may not not be compelling enough to draw customers away from “differentiated” retailers such as Trader Joe’s, Jungle Jim’s, Starbucks, Whole Foods, Wegmans or Costco.
Some day I suspect an enterprising grocer will put ladies make-up clinics, or sports videos for men, or a local historic and nostalgic area in center store. These ideas, of course, may not be the best suggestions for today’s evolving consumers but they do illustrate the heart of differentiation.
The heart of the store is an ideal location to develop the source for local goods and services along with ethnic food selections. Developing support for local items is a great way to leverage community. Why not use center store and develop a ‘farmer’s market’ aisle and bring the ‘shop in shop’ concept to the grocery store? This would provide yet another vehicle to further develop the local grocery store as a community destination.
The center store will never eclipse perimeter departments in terms of sensory enjoyment, abundance and the subliminal message of freshness.
But center store does send important messages to shoppers when it offers the right targeted assortment and sustains high service levels.
These are not new values. The methods for achieving them have evolved, however.
Targeted store-level assortments result when retailers apply data-driven shopper analytics to the planning process and adopt techniques that enable In-Store Implementation. Key among those ISI processes is Computer Generated Ordering (CAO) – for both warehouse-delivered and DSD products—that ensures product availability without drowning the enterprise in excess inventory investment.
Targeted assortment and service levels are tightly coupled aspects of center store performance that I believe can spell the difference for the grocery retailer.
I agree with the comments of Frank/Ben/Gene—and in a certain way, have a slightly different point of view than the one suggested by Susan Viamari. Differentiating, changing the shopping experience, providing service, and doing things that are not exclusively product-based (assortment, pricing, superior products). While that cannot be ignored, it is not sufficient to create growth.
Offering something that is unique (and in center-store, that is rarely solely product-based) and not focused on the traditional “needs”—but on future “jobs” to be done is an area that more progressive clients of mine have been pursuing.
Making the center store appealing and differentiating it have been perennial issues for grocers. It may not seem very glamorous, but I believe that cneter store aisles and shelves don’t showcase the merchandise in the best way. Look at apparel retailers who know a lot about sightlines and displays—perhaps there are lessons there on re-inventing the center store experience.
In my area it is all about price, price, and price for the top sellers. If you do not compete in those areas, than trim the excess, and get aggressive where you can to compete. Gluten free, club packs, diabetic, and ethnic foods will do well, if the selection is good, along with “fair prices”.
Anyone can sell a cheap can of beans, but it takes a smart retailer to move the higher-end stuff, so take a balanced approach to move the top sellers, and present the unique foods to your particular market in a way that stimulates extra sales.
Integrate more fresh items into the center store to get more life into that area. Break up long aisles and group by meals.
Grocers can compete with more relevant assortments for local shoppers—specialized categories, in store signage to help find products, and more. The convenience meals for away from home eating, “better for you” assortments that make sense for every day shoppers—categories that smaller stores can’t execute as well.
In order to differentiate, one has to really be different or at the very least, portray themselves in a different way. The problem is that too many stores simply are “repackaged” versions of each other and don’t truly offer any unique or compelling differences. Things like local items, gluten-free, and other specialty items need to be presented and marketed effectively. Further, value has to exist on key items in order to drive sales as shoppers do compare these items to mass and other retailers.